7500 EV tax credit update with new bill

[VVS Wraith]

What is basically the short answer on a pure coming next year if confirmed before the bill was passed?

 

[noobzilla]

What is basically the short answer on a pure coming next year if confirmed before the bill was passed?

There is no clear guidance yet from IRS whether the 300$ non-refundable part will qualify as a "binding contract".

 

[Babyrocko1908]

There is no clear guidance yet from IRS whether the 300$ non-refundable part will qualify as a "binding contract".

This is inaccurate. The language in the published transition rule did not set an amount for a binding contract. The language states "non-refundable deposit OR 5% of the purchase price." It's best to check with each buyers individual state to determine what is a binding contract. As of now, converting our reservations to non-refundable deposits likely meets the definition. The 5% example given in the binding contract section of the transition rule applies to damages where if only 5% of the contract price was paid, this doesn't limit a buyer's damages to 5%.

 

[noobzilla]

This is inaccurate. The language in the published transition rule did not set an amount for a binding contract. The language states "non-refundable deposit OR 5% of the purchase price." It's best to check with each buyers individual state to determine what is a binding contract. As of now, converting our reservations to non-refundable deposits likely meets the definition. The 5% example given in the binding contract section of the transition rule applies to damages where if only 5% of the contract price was paid, this doesn't limit a buyer's damages to 5%.

Yeah you're right my response is not 100% accurate but he asked for a short answer! Bottom line is there is no 100% certainty that confirmed reservations will qualify for EV credit. We can cherry pick parts of what was written and go around in circles all day as either of our argument could be valid.

I'm not a lawyer but I've taken Constitutional Law courses and minored in Public Policy as well. Here's my interpretation of it

----------------------------
A) Interpretation by intent of policy

What is the intention of this Transition Rule? It's mainly for people who have serious intention of purchasing a car in the near term and/or have already placed an order but the car may not arrive right before the signing of the bill for whatever reason like delivery time, production delays, registration. That "serious intention" needs some sort of physical/written evidence hence the "binding contract" otherwise a homeless person can just claim he had serious intention to buy and was just waiting to win the lottery. That "serious intent" can be gauged by financial investment/liability

1) amount of payment towards the car (a $300 deposit is not as serious as a 50% deposit) AND/OR
2) amount that either party can retrieve from the other for breaching is not limited (like a contract that indicates that a car dealer would be allowed to obtain a non-specific amount of money as damages resulting from a canceled order) AND can be enforced by State Law (meaning the car dealer can seriously go after the customer so it's not just some insubstantial threat)

"a written contract is binding if it is a) enforceable under State law and b) does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit)" -IRS

"If you cancel your order or breach this Agreement, Lucid will retain your Order Deposit as liquidated damages to the extent permitted by law. You acknowledge that the harm caused by your cancellation or breach would be impossible or very difficult to accurately estimate and that the Order Deposit is a reasonable estimate of the anticipated or actual harm Lucid may incur." - Lucid Order Terms and Conditions

I highly think that these Order contracts from Lucid is enforceable by states so that passes item a)

There is no clear pass on item b). Although Lucid explains that it's hard to quantify the damage but the deposit is a reasonable estimate, there is no indication in the contract that would allow Lucid to obtain additional damages from the customer. From their wording, it seems they're waiving that power and just limiting it to the deposit since for them it is reasonable. If Lucid had mentioned that they can go after a higher amount like full price of the car, then that would certainly clear item b) since in general higher amounts would increase the seriousness of intent to purchase.

bonus item:
Date of delivery. There's no end date on the policy. Just says delivered after the passing of the bill. What about the other EV's that are not being produced yet with estimated delivery of 2024 or perhaps beyond? For the intention of the policy, it seems quite a stretch to allow yet-to-be-produced cars to qualify and bypass new requirements for EV credit. Solution would be to revise the guideline to indicate that the car can qualify if it's already been in production in 2022 because the intention of the Transition Rule is for people who had already ordered / have serious intent to purchase in 2022.

----------------------------
B) Interpretation by wording alone

"if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract.... For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions."

Says there significant, which precedes the similar sentence saying "For example... if a customer has made a non-refundable deposit ...it is an indication of a binding contract. " That second sentence doesn't say significant but it is 'for example' only and is likely referring to the previous mention of significant non-refundable deposit.

Here's an example....
A fox daycare has a shared area as well as a separate area exclusive only for arctic foxes. Mechanism to prevent co-mingling in the exclusive area is in place. A brown fox must fully pass through the door to activate the alarm. For example, a fox that just peaks through with its head will not activate the alarm.

It's clearer to say "For example, a brown fox that just peaks through with its head will not activate the alarm." But even without mentioning brown, we can infer that it is referring to brown foxes. In the case of non-refundable deposit, I can infer that the example is referring to substantial. "...the forfeiture of a deposit" That deposit can also be inferred to referring to substantial.

There is an example exemption of 5% or more deposit that even though it is specified and limited to that 5% or more, it is substantial enough. Does the $300/$1000 qualify as substantial? It's 0.4% of a base Pure and 1.05% of a base Touring, respectively. Again, I can go back to the "serious intent" discussion above. The seriousness can be evidenced by how much a customer can lose by not following through with the contract. There's that fear factor from the customer side that they stand to lose substantial amount if they back out. As it stands, Lucid seems to have waived its ability to go after a higher amount by limiting itself to the deposit amount. Lucid mentions that it's difficult to get an exact estimate of the damages but that the deposit is sufficient for them. However, by stating that, Lucid has significantly reduced the fear factor on the consumer side.

Therefore, in my conclusion, Lucid's contract does not qualify due to Lucid limiting the damages of a breached agreement to purchase to a specified amount $300/$1000 deposit, maximum.

 

[noobzilla]

For those who would argue that $300/$1000 is substantial enough, what amount would be considered insubstantial?

I'm still hoping we qualify though. I want that $7500.

 

[Volund]

I'm still hoping we qualify though. I want that $7500

This whole iffy situation is why I decided to say screw it and go for the AGT

 

[Ksa23]

I think the clearst guidance we've gotten is from Lucid directly:

Your vehicle purchase may still be eligible for the $7,500 federal EV tax credit if you take delivery by December 31, 2022.2 If
you act quickly, we may be able to arrange for delivery of a Lucid Air Grand Touring in as little as 2 weeks. If you believe you
may qualify for this tax credit after consulting your tax advisor and are interested in taking delivery prior to the end of the
year, please reach out to a Lucid associate.

They give themselves a standard disclaimer of it not being tax advice, but it might as well be.

https://www.lucidmotors.com/media/document/inventory.pdf

 

[Volund]

I think the clearst guidance we've gotten is from Lucid directly:

Your vehicle purchase may still be eligible for the $7,500 federal EV tax credit if you take delivery by December 31, 2022.2 If
you act quickly, we may be able to arrange for delivery of a Lucid Air Grand Touring in as little as 2 weeks. If you believe you
may qualify for this tax credit after consulting your tax advisor and are interested in taking delivery prior to the end of the
year, please reach out to a Lucid associate.

They give themselves a standard disclaimer of it not being tax advice, but it might as well be.

https://www.lucidmotors.com/media/document/inventory.pdf

After getting my used AGT, I've realized I could've benefitted from the AGT tax credit had I just got it new (assuming I get it by the end of the year) . But then I wouldn't have really committed to a road trip until way later and really forced myself to use it. Really enjoying it thus far.

Plus, I guess the 119k was a good deal, tax credit or not. But I wonder if having 2 drivers on record would make it worth less in a resale market.
All my tax credit money goes towards registering the damn vehicle anyways, 8.5k where I'm at

 

[noobzilla]

This whole iffy situation is why I decided to say screw it and go for the AGT

I've adjusted my purchase assuming that I won't get EV credit past 2022 delivery. It's better for me that if I qualify then it's bonus savings vs hoping for it but not getting it then getting screwed.

I think the clearst guidance we've gotten is from Lucid directly:

Your vehicle purchase may still be eligible for the $7,500 federal EV tax credit if you take delivery by December 31, 2022.2 If
you act quickly, we may be able to arrange for delivery of a Lucid Air Grand Touring in as little as 2 weeks. If you believe you
may qualify for this tax credit after consulting your tax advisor and are interested in taking delivery prior to the end of the
year, please reach out to a Lucid associate.

They give themselves a standard disclaimer of it not being tax advice, but it might as well be.

https://www.lucidmotors.com/media/document/inventory.pdf

The 2022 delivery is clear, no doubt or question about that. 2023 deliveries though... it's a mess.

 

[Babyrocko1908]

Yeah you're right my response is not 100% accurate but he asked for a short answer! Bottom line is there is no 100% certainty that confirmed reservations will qualify for EV credit. We can cherry pick parts of what was written and go around in circles all day as either of our argument could be valid.

I'm not a lawyer but I've taken Constitutional Law courses and minored in Public Policy as well. Here's my interpretation of it

----------------------------
A) Interpretation by intent of policy

What is the intention of this Transition Rule? It's mainly for people who have serious intention of purchasing a car in the near term and/or have already placed an order but the car may not arrive right before the signing of the bill for whatever reason like delivery time, production delays, registration. That "serious intention" needs some sort of physical/written evidence hence the "binding contract" otherwise a homeless person can just claim he had serious intention to buy and was just waiting to win the lottery. That "serious intent" can be gauged by financial investment/liability

1) amount of payment towards the car (a $300 deposit is not as serious as a 50% deposit) AND/OR
2) amount that either party can retrieve from the other for breaching is not limited (like a contract that indicates that a car dealer would be allowed to obtain a non-specific amount of money as damages resulting from a canceled order) AND can be enforced by State Law (meaning the car dealer can seriously go after the customer so it's not just some insubstantial threat)

"a written contract is binding if it is a) enforceable under State law and b) does not limit damages to a specified amount (for example, by use of a liquidated damages provision or the forfeiture of a deposit)" -IRS

"If you cancel your order or breach this Agreement, Lucid will retain your Order Deposit as liquidated damages to the extent permitted by law. You acknowledge that the harm caused by your cancellation or breach would be impossible or very difficult to accurately estimate and that the Order Deposit is a reasonable estimate of the anticipated or actual harm Lucid may incur." - Lucid Order Terms and Conditions

I highly think that these Order contracts from Lucid is enforceable by states so that passes item a)

There is no clear pass on item b). Although Lucid explains that it's hard to quantify the damage but the deposit is a reasonable estimate, there is no indication in the contract that would allow Lucid to obtain additional damages from the customer. From their wording, it seems they're waiving that power and just limiting it to the deposit since for them it is reasonable. If Lucid had mentioned that they can go after a higher amount like full price of the car, then that would certainly clear item b) since in general higher amounts would increase the seriousness of intent to purchase.

bonus item:
Date of delivery. There's no end date on the policy. Just says delivered after the passing of the bill. What about the other EV's that are not being produced yet with estimated delivery of 2024 or perhaps beyond? For the intention of the policy, it seems quite a stretch to allow yet-to-be-produced cars to qualify and bypass new requirements for EV credit. Solution would be to revise the guideline to indicate that the car can qualify if it's already been in production in 2022 because the intention of the Transition Rule is for people who had already ordered / have serious intent to purchase in 2022.

----------------------------
B) Interpretation by wording alone

"if a customer has made a significant non-refundable deposit or down payment, it is an indication of a binding contract.... For example, if a customer has made a non-refundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions."

Says there significant, which precedes the similar sentence saying "For example... if a customer has made a non-refundable deposit ...it is an indication of a binding contract. " That second sentence doesn't say significant but it is 'for example' only and is likely referring to the previous mention of significant non-refundable deposit.

Here's an example....
A fox daycare has a shared area as well as a separate area exclusive only for arctic foxes. Mechanism to prevent co-mingling in the exclusive area is in place. A brown fox must fully pass through the door to activate the alarm. For example, a fox that just peaks through with its head will not activate the alarm.

It's clearer to say "For example, a brown fox that just peaks through with its head will not activate the alarm." But even without mentioning brown, we can infer that it is referring to brown foxes. In the case of non-refundable deposit, I can infer that the example is referring to substantial. "...the forfeiture of a deposit" That deposit can also be inferred to referring to substantial.

There is an example exemption of 5% or more deposit that even though it is specified and limited to that 5% or more, it is substantial enough. Does the $300/$1000 qualify as substantial? It's 0.4% of a base Pure and 1.05% of a base Touring, respectively. Again, I can go back to the "serious intent" discussion above. The seriousness can be evidenced by how much a customer can lose by not following through with the contract. There's that fear factor from the customer side that they stand to lose substantial amount if they back out. As it stands, Lucid seems to have waived its ability to go after a higher amount by limiting itself to the deposit amount. Lucid mentions that it's difficult to get an exact estimate of the damages but that the deposit is sufficient for them. However, by stating that, Lucid has significantly reduced the fear factor on the consumer side.

Therefore, in my conclusion, Lucid's contract does not qualify due to Lucid limiting the damages of a breached agreement to purchase to a specified amount $300/$1000 deposit, maximum.

This isn't a Constitutional Law issue it's s a Contracts issue. I'm going to go 1L contacts law here. A valid contract requires an offer, acceptance and consideration. Consideration is a bargained for exchange of promises between the parties where there's a benefit to the seller and detriment to the buyer. The "amount" of consideration here is irrelevant. The detriment for us buyers occured when we converted our orders to non-refundable, that met the definition of consideration for a binding contract.

In addition, contrary to perception, the IRS isn't out to screw people. Further, the Biden Administration with the help of Congress is on record that they are planning to revisit the transition rule under Infrastructure bill. I'm 90% certain the IRS has no intention of punishing thousands of EV buyers by not accepting the $7,500 tax credit as it stood prior to the passage of the bill. The whole point is to encourage folks to purchase EV's, not penalize buyers because an automaker can't deliver their cars by December 31st.

 

[noobzilla]

This isn't a Constitutional Law issue it's s a Contracts issue. I'm going to go 1L contacts law here. A valid contract requires an offer, acceptance and consideration. Consideration is a bargained for exchange of promises between the parties where there's a benefit to the seller and detriment to the buyer. The "amount" of consideration here is irrelevant. The detriment for us buyers occured when we converted our orders to non-refundable, that met the definition of consideration for a binding contract.

In addition, contrary to perception, the IRS isn't out to screw people. Further, the Biden Administration with the help of Congress is on record that they are planning to revisit the transition rule under Infrastructure bill. I'm 90% certain the IRS has no intention of punishing thousands of EV buyers by not accepting the $7,500 tax credit as it stood prior to the passage of the bill. The whole point is to encourage folks to purchase EV's, not penalize buyers because an automaker can't deliver their cars by December 31st.

Ehh it isn't specifically directly ConLaw but the point is the skills are transferrable. Constitution falls under law. Contracts fall under law. Law is law. I disagree that the "amount" is irrelevant. If it isn't relevant then they couldve just ignored any mention of substantial and not bothered even putting a 5% example. Although that part is once again "In general" what they define as a binding contract. Anyways, I won't discuss this further BUT I do hope you're right as that's what I'm also hoping for

Yes, that's the hope that they do revisit and provide us better wording. I also do think they do not intend to screw us buyers over who already had intention to buy in 2022 but just got screwed by production issues caused by COVID.

 

[juanmedina]

For those who would argue that $300/$1000 is substantial enough, what amount would be considered insubstantial?

I'm still hoping we qualify though. I want that $7500.

I got a call from sales yesterday saying that I need to finalize my Pure order which I thought I already did because that was the only way to lock in the $7500. Anyway, I asked him about the $7500 and the guy at Lucid said that if I not receive the car this year I will not get the $7500. He probably doesn't know what he is talking about but it is not reassuring.

 

[joec]

I got a call from sales yesterday saying that I need to finalize my Pure order which I thought I already did because that was the only way to lock in the $7500. Anyway, I asked him about the $7500 and the guy at Lucid said that if I not receive the car this year I will not get the $7500. He probably doesn't know what he is talking about but it is not reassuring.

That is Lucid's official stance at this point, and I agree with it. While no one knows for sure how the IRS will come down in the end, best not to promise customers something they aren't sure they can get anymore. It's completely out of Lucid's control, so they are attempting to reset expectations.

What we did in August was not "finalization." It was a Hail Mary play to agree to giving up our deposit in the event of cancellation, in exchange for the IRS "maybe" accepting that as a condition for receiving the tax credit after Jan 1. That may still work out, but 26 pages of debate later, no one can say for sure.

Until you actually finalize, you are not in the queue for delivery, no matter when you reserved. Someone who reserved in 2020 but still hasn't finalized will get their car after someone who reserved in July and has already finalized.

Whether you "confirmed" in August has no bearing on anything at this point, as far as the timing of your delivery.

 

[juanmedina]

That is Lucid's official stance at this point, and I agree with it. While no one knows for sure how the IRS will come down in the end, best not to promise customers something they aren't sure they can get anymore. It's completely out of Lucid's control, so they are attempting to reset expectations.

What we did in August was not "finalization." It was a Hail Mary play to agree to giving up our deposit in the event of cancellation, in exchange for the IRS "maybe" accepting that as a condition for receiving the tax credit after Jan 1. That may still work out, but 26 pages of debate later, no one can say for sure.

Until you actually finalize, you are not in the queue for delivery, no matter when you reserved. Someone who reserved in 2020 but still hasn't finalized will get their car after someone who reserved in July and has already finalized.

Yeah and they also told me that I have 30 days to finalize the order or they will raise the price. If I finalize the order can you still cancel it? I would like to see if we will get the $7500 and I will choose the standard audio or something to push my delivery date as much as I can. How will the $7500 rebate work? Will I only know if I get it after doing my taxes at the end of 2023?

 

[noobzilla]

Yeah and they also told me that I have 30 days to finalize the order or they will raise the price. If I finalize the order can you still cancel it? I would like to see if we will get the $7500 and I will choose the standard audio or something to push my delivery date as much as I can. How will the $7500 rebate work? Will I only know if I get it after doing my taxes at the end of 2023?

If cars "confirmed" before the new EV bill passed but was delivered after, the date you will claim the credit is as if the car was delivered on that "confirmed" date in 2022 so it will be in your 2022 tax return. You will receive credit on your Fed income tax for up to $7500. If you owe $9000 taxes, EV credit will bring it down to $1500. If you owe $5000, you only get $5000.

 

[juanmedina]

If cars "confirmed" before the new EV bill passed but was delivered after, the date you will claim the credit is as if the car was delivered on that "confirmed" date in 2022 so it will be in your 2022 tax return. You will receive credit on your Fed income tax for up to $7500. If you owe $9000 taxes, EV credit will bring it down to $1500. If you owe $5000, you only get $5000.

Really, that sound crazy. So claim the tax rebate in 2022 on a car that will get deliver on 2023. If somehow the IRS says that "confirmed" is not good enough; is there a possibility of the IRS saying that you committed tax fraud? Thanks. I wish there was clarity on this because it is really a headache.

 

[joec]

Really, that sound crazy. So claim the tax rebate in 2022 on a car that will get deliver on 2023. If somehow the IRS says that "confirmed" is not good enough; is there a possibility of the IRS saying that you committed tax fraud? Thanks. I wish there was clarity on this because it is really a headache.

Talk to your accountant before you do anything. Don't listen to forum members (including myself) on this topic.

Technically, trying to claim this credit after the IRS clarifies and says we definitely don't qualify could trigger an audit. So you might lose the credit and owe that money after all. Perhaps with a small penalty. And then you have to deal with the massive headache of an audit, which is not a pleasant experience.

I don't think an audit is likely, though. I think the IRS knows this is confusing, and they have been less than clear about how to handle it so far. So at worst, you probably will just have to pay the credit back and maybe pay a small penalty. They don't have the resources (even with the additional funds they got in this act) to audit everyone who buys an EV next year.

My guess is any accountant worth their salt will know before April 15th exactly how the IRS plans to rule on this. They don't know for sure yet, but they will dig until they get an answer. My accountant kicks butt, and I trust her implicitly. She nerds out on this stuff the way I nerd out on code. So whatever she tells me, I'm going to do.

 

[noobzilla]

Really, that sound crazy. So claim the tax rebate in 2022 on a car that will get deliver on 2023. If somehow the IRS says that "confirmed" is not good enough; is there a possibility of the IRS saying that you committed tax fraud? Thanks. I wish there was clarity on this because it is really a headache.

Headache indeed. We are just waiting for clarification from the govt to 100% clear things up regardless of how strongly people here think that it does/does not qualify.

 

[Mr_rhythm]

Headache indeed. We are just waiting for clarification from the govt to 100% clear things up regardless of how strongly people here think that it does/does not qualify.

Noob is wrong though on when you take the claim. If you get the car in 2023 you would take the credit on your 2023 tax return. If you get the car in 2024 you’d take the claim on 2024 return. No matter how this works out if you take the claim before you receive the car you will get dinged.

 

[noobzilla]

Noob is wrong though on when you take the claim. If you get the car in 2023 you would take the credit on your 2023 tax return. If you get the car in 2024 you’d take the claim on 2024 return. No matter how this works out if you take the claim before you receive the car you will get dinged.

Hmmm I'll read into this again. Perhaps that one website I was reading info on mis rephrased the bill but I think you're right we claim it on 2023. My bad